Bitcoin. Ethereum. Dogecoin. Litecoin. You’ve probably been hearing these names a lot in the past two years, but should you be paying more attention to them?
Cryptocurrencies used to be associated mainly with shady transactions or online scams. Now, they’re gradually becoming a real method to pay for goods or services. So much so, that the government of El Salvador has adopted Bitcoin as legal tender—in the process causing some of the citizens to protest, so it wasn’t all smooth sailing.
Crypto trading is a popular pastime even in countries like Nigeria. On the other hand, China has banned mining and transactions with all cryptocurrencies. Could other countries follow suit? Only time will tell.
If governments are unsure about cryptocurrencies, what should business owners do? If you’re selling anything online, should you race towards crypto adoption, or stick to fiat currency?
As with any overhyped topic, there’s a lot of biased information about this coming from both crypto nerds and crypto sceptics. It’s hard to say with 100% certainty whether your business should, or shouldn’t adopt cryptocurrency.
So, in this article, we’re going to analyze the pros and cons of cryptocurrencies and see what you, as a business owner, could gain (or lose) from crypto adoption.
What can you gain from adopting cryptocurrency?
Easier access to international markets
The more payment options you offer, the more potential clients you can reach.
If some of your customers are tech-savvy and would appreciate the option to pay with Bitcoin, making it possible would make them far more likely to return to your business. Crypto can also be a good way to tap into foreign markets without dealing with the back-office work necessary to handle traditional payments in different countries.
By design, cryptocurrency is not tied to a specific country or state. It can be transferred anonymously, in a matter of seconds, from one continent to another. In some parts of the world, paying with crypto might be the most comfortable for your customers, so it might be good to at least have a Bitcoin payment option next to PayPal or credit cards.
Faster, easier transactions
FinTech has been disrupting finance so much that it’s already relatively easy to accept and manage any type of transaction. Nonetheless, transfers involving fiat currency take some time to be processed, and there’s plenty of middlemen involved.
Cryptocurrency transactions can happen much faster, with less third-party involvement. Theoretically, it could also be much safer—the infrastructure and technology aren’t quite there yet, but if you know what you’re doing, you can protect your crypto funds from being stolen.
Minimize chargeback fraud
Using cryptocurrency in your business can minimize the risk of chargeback fraud. Sometimes customers, instead of messaging or calling you to ask for help or a refund, directly ask their bank to return the money for their order. Unfortunately, you learn about this only later on, when you get a note from the bank that the customer’s chargeback request was accepted - and you have to pay a fee to them for handling the situation.
Even worse, you might get slapped with the chargeback for legitimate purchases - which happens often. Technically, you could try to argue with the customer’s bank that the chargeback shouldn’t happen, but it might take a lot of time and there’s no guarantee you’ll win.
How could cryptocurrency help? Thanks to the underlying blockchain technology, cryptocurrency payments are pretty immutable. Once a transaction is completed and confirmed by you and the customer, there’s no simple way to cancel or reverse it - the data can’t be changed or edited without approval from all parties.
You can still refund the money to the customer if it’s a valid complaint, but there’s no risk of surprise chargeback like with traditional banks. Whether you return the funds and on what conditions is up to you - so that gives you a lot more control when it comes to accepting or rejecting refund requests.
Adding cryptocurrency to your regular payment methods could also mean fewer transaction processing fees. PayPal, for example, charges close to 4% per transaction. Banks and credit card companies meanwhile tend to charge from 1-3% per transaction, and that’s not including the payment processor’s fee.
Cryptocurrency transactions often don’t have any added fees - peer-to-peer trading with cryptocurrencies means you don't need an intermediary bank or a financial institution. If you use a third-party service to help you with payment processing, then you'll have to pay a fee for their service, but those can be as low as 1%.
What do you risk when you adopt cryptocurrency?
If you only look at the benefits, it seems like cryptocurrencies are a surefire way to boost your business. But then why are so few companies adopting crypto?
Cryptocurrency has a fair share of risks associated with it, which might scare you off from adopting it (at least until these, and other, risks are resolved).
Cryptocurrency value is extremely volatile
Cryptocurrencies are all but stable. One tweet from Elon Musk about “breaking up” with Bitcoin was enough to send its price tumbling down. In the crypto world, sudden swings in prices happen every day.
If you’re not careful (or lucky) with how you manage your funds, instead of saving or earning money on cryptocurrency exchanges, you might lose money instead. Even if you get payments from customers in Bitcoin, you might lose a chunk of your earnings by simply exchanging them for fiat money on a wrong day.
Plus, sudden jumps in cryptocurrency prices might make it tricky to price your products or services, and even more problematic to deal with refund requests.
Customers are still afraid of cryptocurrencies
Some sources report that there are over 100 million crypto users worldwide. That’s not a lot, really. If you ask your aunt or a random shop clerk about crypto, they don’t get what it’s all about. Try talking about blockchain, mining, encryption, or distributed ledgers, and you can put almost any adult to sleep—and this still won't convince them to open up a digital wallet and start using crypto.
Crypto still isn’t properly regulated
The lack of proper regulations regarding cryptocurrencies is also a problem—especially those regarding customer protection. If a customer pays with Bitcoin or another cryptocurrency for something that turns out to be a scam, there’s no chance at all they will get their money back.
If you lose your private key (used to open the digital wallet that stores your crypto), there’s no way to recover it or change the key used, so your crypto is lost for good.
With fiat money and traditional digital finance, you have to really work hard to lose your money, and there are many safety nets that protect you from it. With crypto, there’s no infrastructure to protect you. Until crypto is as simple and safe as online banking or PayPal, it simply won’t achieve mass adoption.
Cryptocurrencies use a massive amount of energy
This might come as a surprise, but cryptocurrencies are not eco-friendly. To mine crypto, you need huge computer farms that work around the clock at maximum capacity.
Bitcoin mining consumes from 91 to 120 (depending on the study) terawatt-hours of electricity annually - that’s more than Argentina uses in a year! According to other research, mining bitcoins uses up more than seven times the electricity used by all of Google’s global operations.
In times when clean energy and renewable energy sources are on everybody’s mind due to climate change and pollution, cryptocurrencies have only made this issue worse. This enormous energy requirement was supposedly one of the main reasons why Elon Musk’s Tesla company stopped accepting Bitcoin payments. So, if your brand is eco-friendly, you might have a tough time adopting cryptocurrency.
Now you know what you can gain, and what you might lose if you adopt cryptocurrencies in your business. Hopefully, it will help you decide whether you need to adopt crypto, or if you can forget about it until it actually becomes as normal as fiat money and traditional banking.
Ultimately, it comes down to your customers. Are you selling digital products, or real goods and services but to customers that are highly tech-savvy? You’ll probably want to adopt crypto just to make them happy!
In other cases, chances are that you don’t need to worry your head about crypto adoption for the foreseeable future.
About the Author
Michał Słupski is a technology evangelist and marketer at Angry Nerds.